Dear Momentum Options Subscriber,

The market traded in one of its tightest ranges since July on Monday, as traders treaded cautiously ahead of this week’s barrage of earnings announcements. Although the indices finished mixed, tech held up well following news of a merger between Dell and EMC (EMC, $28.35, up $0.49). The record tech merger between the two for $67 billion was rumored last week, but the official announcement was made just ahead of Monday’s opening bell.

The Dow added 47 points, or 0.3%, to close at 17,131. The blue-chips traded down to 17,064 on the open, with support holding at 17,000-16,900. The 20-point loss was shrugged off within the hour, as the bulls made a run to 17,139 intraday. Resistance at 17,300-17,350 and the 100-day moving average held but will likely be challenged on a move above 17,200.

The S&P 500 gained 2 points, or 0.1%, to finish at 2,017. The index tested a low of 2,010 shortly after the open, with support at 2,000-1,990 and the 50-day moving average easily holding. The rebound to 2,018 fell shy of near-term resistance at 2,020-2,025. A move above the latter should get 2,050-2,060 in play.

The Nasdaq advanced 8 points, or 0.2%, to end at 4,838. Tech was choppy on the open, with the bears pushing a low of 4,818. The bulls held support at 4,800 before making a run to 4,846. Although near-term resistance at 4,850 stuck, the index managed to hold its 50-day moving average into the close. This was a bullish sign that a possible push towards 4,900 could come this week.

The Russell 2000 slipped a point, or 0.1%, to settle at 1,164. The small-caps kissed 1,166 in the opening minutes but stayed in the red throughout the rest of the session. Resistance at 1,170-1,175 was never really threatened before the dip to 1,159. Support at 1,160-1,150 held, but a close below the latter would be a bearish development.

The S&P 500 Volatility Index ($VIX, 16.17, down 0.91) cleared 17.50 after trading to a high of 17.81, with resistance at 18.50-19 holding. The drop to 16.15 into the closing bell was another bullish signal that a test to 15 is in the works.

I could have a New Trade shortly after the open, depending on market action, so stay close to your email inboxes or wait for my text alert. New subscribers can sign up to receive SMS text message alerts by clicking here.

From desk to press, futures look like this: Dow (-76); S&P 500 (-10); Nasdaq 100 (-26); Russell (-5).

Momentum Options Play List

Closed Momentum Options Trades for 2015: 85-33-2 (71%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.

All prices given in this update are current as of 8:00 a.m. EST.

I hereby disclose that I will be participating in the following trade(s). Every Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the portfolio.

 

Qualcomm (QCOM, $57.79, up $0.01)

QCOM November 60 calls (QCOM151120C00060000, $1.06, down $0.09)

Entry Price: $1.20 (10/9/2015)

Exit Target: $2.40

Return: -12%

Stop Target: None

Action: Yesterday’s high reached $58.08. Resistance is at $58, followed by $60-$60.25. Support is at $56 on a close below $57.

 

Kohl’s (KSS, $46.50, down $0.77)

KSS November 42.50 puts (KSS151120P00042500, $0.78, up $0.09)

Entry Price: $0.95 (10/7/2015)

Exit Target: $1.90

Return: -18%

Stop Target: None

Action: Support is at $46-$45. A close below $45 should lead to the low $40s. Resistance at $47.50 has been strong.

You can read my detailed write-up in the Oct. 7 Mid-Market Update. Earnings are due out Nov. 12.

 

Financial Select Sector SPDR (XLF, $23.26, up $0.02)

XLF November 22 puts (XLF151120P00022000, $0.18, down $0.06)

Entry Price: $0.66 (9/24/2015)

Exit Target: $1.35

Return: -73%

Stop Target: None

Action: Resistance is at $23.50-$23.75 and the 50-day moving average. A close above the latter could lead to a test to $24 and the 100- and 200-day moving averages. Support is at $23.

 

Cisco Systems (CSCO, $27.96, up $0.05)

CSCO November 27 calls (CSCO151120C00027000, $1.43, down $0.08)

Entry Price: $0.62 (9/16/2015)

Exit Target: $1.75 (closed first half at $0.87 on 10/5/2015)

Return: 85%

Stop Target: $1.30 (Stop Limit)

Action: The calls traded down to $1.34 yesterday on the stock’s dip to $27.76. Another test to this level will likely trigger the $1.30 Stop Limit on the second half of the trade. If so, the overall return on the trade would be 75%.

Resistance is at $28. Support is at $27.50-$27.25 and the 100- and 200-day moving averages.

 

Corning (GLW, $17.26, down $0.26)

GLW November 19 calls (GLW151120C00019000, $0.18, down $0.10)

Entry Price: $0.60 (9/16/2015)

Exit Target: $0.75

Return: -70%

Stop Target: None

Action: Support is at $17. Resistance is at $18.

You can read my take on GLW in the Sept. 17 Pre-Market Update. Earnings are due out on Oct. 27.

 

PayPal Holdings (PYPL, $32.63, up $0.57)

PYPL January (2016) 40 calls (PYPL160115C00040000, $0.61, up $0.06)

Entry Price: $1.05 (9/14/2015)

Exit Target: $2.10

Return: -42%

Stop Target: None

Action: Resistance is at $32.75-$33 and the 20-day moving average, followed by $34. Support is at $31-$30 on a close back below $32.

You can read my detailed write-up on PYPL in the Sept. 15 Pre-Market Update.

 

Trades on Hold — other 2015 Portfolio Open positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.

Sony (SNE) October 24 puts (from 9/22/15) — Continue to hold.

Starbucks (SBUX) November 50 puts (from 9/28/2015) — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options